Sustaining Drive for Growth

MOCIE lays out strategies to make Korea an economic powerhouse

Korea caught up with leading industrial countries in the world thanks to the speedy development of a number of its key industries including shipbuilding, automobiles and others playing the role of cash-cow for the national economy, said Director-General Lee Tae-yong of the Capital Goods Industry Bureau of the Ministry of Commerce, Industry and Energy in a report.
The country has the production base and the IT infrastructure up to the world level and the dynamic nature of its economy has upgraded its image as a global leader. The shipbuilding industry is ranked No.1 in the world, the petrochemical industry No.5, the steel industry No.5 and the automobile industry No.5 The share of those major industries in the GDP growth stands at 32.3 percent up from 12.3 percent in the 1990s, the MOCIE official said.
Shipbuilding:
The industry expects its exports to be the largest in its history this year due to reductions in major material including steel plates and its enhanced capability to build high value-added ships. Key issues facing the industry are securing core technology and the flexible experienced manpower market.
The industry continued to sustain its No.1 position in the world for three years since 2003 in terms of orders, shipbuilding and order backlog. The industry is called on to continue to secure core technologies, and manpower training to continue to lead the world. Its order target has been set at $20 billion this year, up from $17.3 billion last year. The industry needs to boost its technology for building LNG carriers including the construction of cargo tanks. The government has been providing 11.7 billion won to the industry to fund the development of core technologies and their commercial use by 2009. The industry has also been engaged in the development of ice-breakers and vessels that can sail in the frozen seas and technologies for building marine plants.
The Ministry also will see that core parts for LNG vessel cargo handling systems are developed. The ministry will also see that the industry will expand manpower training facilities and set up professional schools with courses tailored for the needs for each function to expand the turnout of shipbuilding manpower, which is estimated to total 1,350 this year. A task force made up of industry, industry association and the ministry will be set up to oversee the issue of manpower supply and demand .
The development of parts and material has helped record a surplus in the international trade sector for 9 years in a row due to the strength of bottom structure of the industries with their trade surplus estimated at $20 billion in 2005, up from $6.2 billion in 2003, the director-general said.
But their future performances cannot be predicted to proceed well due to the lack of investment to upgrade facilities, technologies and the development of core parts, with growing reliance on imported parts, the MOCIE official said. He said facility investment in the sector averaged only 4.2 percent during 1998 and 2004 with 3.4 percent expected in 2005. Investments to secure an international edge by making products high value-added and segregated from rival products have been limited to a few sectors and large firms. Korea's world brand-name products totaled 77 only, compared to 884 for the United States, and 787 for China. A heavy reliance on Japan for parts and material has long been a chronic problem for Korea. A high rate of development for developing countries including India and China are expected to pose a threat to Korea's major industries, rather than a chance for them. The MOCIE official said Korea needs to create a dynamic complimentary industrial structure among countries in Northeast Asia to overcome crises and expand chances and narrow competitive strength with China. A key factor in the situation is to search for strategic position providing a link between a high-tech Japan and China's traditional technologies, Lee said. A study made on future outlook of major industries said that semiconductor, automobile and shipbuilding industries would continue to enjoy a competitive edge over China, with industries like computer, communication equipment and general machinery to continue to be competitive over a long period of time. But electronic home appliances, textile, and steel are likely to lose their competitive edge in the not so distant future, while the petrochemical industry has been losing its competitive edge already, the study said.
The report made by the Capital Goods Industry Bureau stressed that Korea should try to strengthen its image as a strong industrial country with a sound base through the renaissance strategy for major industries to overcome its weak points relying on the accumulated strength during its development process.
Strong features for Korean industries include the IT sector, which could mix its capabilities for core technologies and secure world-level production and application technology to possess the capacity to produce high value-added products. Korea also has the ability to cope with the needs of the world market with cost-competitive products attained through high effectiveness of installations and productivity.
Weak points, on the other hand, are the absence of technologies to produce core parts and materials, although it has the means to turn out average parts and material. Another weak point is the lack of cooperation between large and small firms to set up a system to complement each other, sharing large firms'competitive technology base.
The outlook and issues of major industries in 2006:
Automobiles:
The report said the auto industry sees a slight increase in domestic sales of cars this year owing to the recovery of the domestic economy. Car exports would also face a slight reduction from last year due to an intense competition and a rise in production in overseas car plants, although a fall-out from the U.S. auto giants'sluggish operations is expected in the auto market across the United States this year. The hybrid cars using alternative energy are expected to emerge in the market this year, intensifying global competition.
Industrial Machinery and Robotics:
Exports to the Middle East are likely to expand centered around such products as industrial plants. But it has to be prepared for pursuit by China by improving product quality and turning out high value-added products. The robotics industry should be prepared for an intensive competition over market share by pooling domestic RT capability to build a base.
Material production industry group:
The steel industry faces an uphill fight to increase its sales this year due to a sluggish construction market and a glut in China's steel industry. But the industry will be able to continue to lean on automobile and shipbuilding, in addition to other manufacturing industries for stable sales. It has to make its products distinctive in its major market in China and diversify its products in other markets to invigorate its exports. The petrochemical industry is expected to do well this year in exports, although China could threaten it with an increased supply in basic raw materials.
The high-tech core material sector including alternative energy and environmentally-friendly materials needed to build a technology infrastructure base to close the technology gap with advanced countries.
Strategies for Promotion and Issues in 2006:
A strategy dubbed a renaissance will be promoted for key industries this year in a step with a goal to achieve 1 trillion in foreign trade for the country. It calls for expanding the base for independence for parts and material industry to strengthen its image as a leading industry, one of the world's best. It also includes a plan to build a base for new major growth forces.
In order to make Korea a supply base for parts and material, efforts should be made to build a trade and industrial structure that will help the plan by lending energy to parts and material industries. The report said the existing major industries will be made to boost their value-added portions and segregated to make them more competitive and profitable.
In the case of the shipbuilding industry, it should make an effort to secure technologies for building high value-added vessels, including LNG carriers. The automobile industry will try to develop futuristic vehicles by securing core technologies and the base for their commercial operation. The steel industry will acquire the top technologies in the world by commercializing FINEX and Strip Casting steel-making technologies. The machinery industry is urged to build a reform base for production processes and product quality through e-manufacturing. The petrochemical industry should work on developing alternative energy and producing environmentally-friendly products.
The industries about to emerge as major industries for the country have been recommended to build a base for future growth by securing future-type core technologies. In the case of the intelligent robotics industry, it is urged to make an effort to secure a base to turn Korea into a strong robotics country by upgrading its technologies including one for killer application. The aircraft industry is encouraged to make an effort to localize parts for helicopters developed in the country under the KHP project. nw

Director-General
Lee Tae-yong
of the Capital Goods Industry Bureau of the Ministry of Commerce, Industry and Energy